Will Vultures Be Allowed to Undermine the G-8 Summit?
In January, I saw first-hand the impact that decisions from a G-8 summit meeting can have on people’s lives. I visited a rural health clinic in Siavonga, Zambia which had recently abolished “user fees” for access to health care. For residents, it was a life-saving decision: now, many more patients had access to HIV/AIDS drugs that could literally save their lives.
What did a G-8 summit have to do with this? The promise made by world leaders at their summit in Gleneagles, Scotland in July 2005 to provide expanded debt cancellation made the removal of user fees in that health clinic possible. Zambia decided to use some of the funds it saved from debt cancellation to abolish user fees at rural health clinics.
But as G-8 leaders prepare to meet next week in Heiligendamm, Germany, their commitments and promises are at risk. Why? Because the actions of so-called ‘vulture funds,’ which are swooping in to snatch the proceeds of debt cancellation from countries like Zambia.
Here’s how they work: ‘Vulture funds’ seek to make a profit by buying up ‘bad’ debt at a cheap price, then try to recover the full amount or more, often by suing through the courts. In the 1990s, vulture funds targeted middle income countries like Peru. But recently, now that African nations have received debt cancellation, suddenly they have more access to cash - and thus look more attractive to opportunistic vulture funds.
The latest example of this outrageous practice came in late April. A UK court ruled that Zambia must pay Donegal International, a vulture fund based in the British Virgin Islands but whose sole director is an American, $15 million for a debt Donegal originally acquired for just over $3 million. This year, Zambia expected to save about $40 million from debt relief - savings which enables the government to keep health care free in rural areas. Now instead of using $15 million to expand access to health care for its impoverished citizens, this money will instead go to line the pockets of a wealthy American investor.
Zambia is not, unfortunately, an isolated case. There are 14 African nations which have been sued by vulture funds, commercial creditors, and others creditors not party to the G-8 debt deal since 1999. Right now, vultures are threatening Zambia, Republic of Congo, and Liberia.
The vultures are undermining the promise the G-8 made two years ago in Gleneagles. To preserve their own initiative and credibility, leaders must take action now. In recent weeks, the Bush administration, UK Prime Minister Gordon Brown, and German officials have all expressed concern about vulture activity. Even the Paris Club joined in last week and “agreed to intensify their work on this issue with a view to identify concrete measures to tackle this problem.”
These statements of concern are welcome, but concrete action is needed now so that what happened to Zambia will not happen to other African nations. There are three specific steps that the G-8 can and should agree to this week.
First, they should urge the World Bank to more aggressively buy back outstanding commercial debts in eligible countries. This would get debts at risk of being bought up by vultures out of the public domain - so they cannot strike again. Second, they should support the development of strong codes of conduct for commercial creditors and a strong charter for responsible lending. Third, they can increase technical and legal assistance to countries with debts at risk. These steps would surely stop some of the lawsuits.
Ultimately, however, what is needed is changes in law in the US, UK, and France, where most vulture cases are heard, to outlaw vulture fund profiteering.
The G-8 should quickly deal with this problem and then return to the much bigger challenge ahead - the urgent need for bold new commitments to end excruciating global poverty. Commitments made 2 years ago are not nearly enough - a bold new deal is needed to meet the Millennium Development Goals.
The crisis of debt is far from over. Poor countries - even after the 2005 debt deal - are still sending $100 million / day to the rich world. Unjust, illegitimate debts that benefited no one are still on the books. And the G-8 have yet to live up to their promise to stop harmful conditionality and allow countries to choose their own development path - undermining the benefits of debt cancellation much like the vultures do. The G-8 must have the foresight to put forward a bold new deal to truly end the crisis of debt.
It’s a tall order. But we have seen the impacts decisions from the G-8 can have before. Let us hope they set their sights high this week - by ensuring previous commitments are not undermined by vultures — and by setting bold new visions that put us on track to truly cancel debt and end global poverty.
Neil Watkins is National Coordinator at the Jubilee
Profit profit profit…yee haw! More for me and screw everyone else.
Lost in America’s memory hole there is buried a truly hideous scandal. It involves two private business groups, one headed by James Baker, long-time consigliore to the Bush crime family, and the other, by Madeleine Albright, Secretary of State under Clinton and infamous author of the “the deaths of 500,000 Iraqi children were worth it” statement when referencing the comparative benefits of Clinton’s neocon inspired Iraqi sanctions scheme. It seems that, once back in the private sector, both of these high minded ex-public servants saw fit to slice a billion dollar commission for their services as hired negotiators of a reduced reparations package due the Kuwaitis, under U.N. auspices, in compensation for the losses resulting from the Iraq invasion. It is interesting to remember that said invasion, encouraged in a blatant double-cross by Bush One, provided convenient cover for his Desert Storm genocide and the massive redesign of the Middle East. Imagine these two tiny groups carrying away a billion dollars of wealth, money which both war-ravaged countries desperately needed to save tens of thousands of seriously damaged lives. Imagine further, that these parasites were positioned to commit this heinous crime against humanity by dint of their exploiting their government connections. This is what Madeleine Albright is really all about, ditto James Baker. One a Clinton Democrat, the other a Bush Republican.
This is an example of how Washington insiders operate in clandestine situations, far from home, when it is the wealth of the voiceless which is being swindled and the lives of the powerless which are being destroyed.
The capitalist vultures which Mr. Watkins references can have their wings clipped by the simple swipe of the President’s pen, by simply outlawing the marketing of commercial paper which is the product of outlandish banking scams perpetrated upon helpless starving countries. But will it be done? Will doing the right thing trump the interests of these unreconstructed pirates? Here’s a little hint… many of these dirt poor countries are not dirt poor for no reason. They have been assisted in achieving and maintaining their grinding poverty by the rich and powerful, generation after generation.
There is not much hope that anyone in Washington, or elsewhere in the great havens of capitalism, will lift a finger to restrain the continued predations of these perfectly “legitimate” businessmen and women, to whom the stain of indecency is but a minor inconvenience. An e-mail or phone call to your local Senator or Congressperson might help. And then again, it might not.
fd32: Thank you for exposing these connections. Baker and Carlyle probably never met a war that needed funding that their profit margins would shy away from either. Imagine the karma that awaits these modern day Ebineezer Scrooges who can so easily rationalize the massive suffering their greed consigns to others. Wow.
fd32 has hit the nail bang on the head. No one is going to close down the vulture funds, least of all corporatist pollies who have been bought and paid for by them. Doing the right thing is just not on their agenda.